UPDATE 1-Libya autonomy group to sell oil from seized ports

Wed Jan 8, 2014 6:05am EST

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* Libyan armed forces warn shippers off seized ports

* Cyrenaica protesters say will provide tanker security (Edits)

By Ghaith Shennib and Julia Payne

TRIPOLI/LONDON Jan 8 (Reuters) - Armed groups demanding autonomy for eastern Libya have invited foreign companies to buy oil from ports they have seized in defiance of the central government in Tripoli.

In an announcement on Tuesday, they also pledged to protect tankers loading crude, after the Libyan defence ministry said it would destroy vessels using ports in the east, which are under control of the protesters linked to a self-proclaimed regional government.

The development adds to an air of chaos as the weak Tripoli government struggles to rein in the armed groups that helped oust Muammar Gaddafi in 2011 but which kept their guns and are now demanding political power and a bigger share of the country's oil wealth.

The conflict is hurting oil revenues, which fund the OPEC nation's government and the import of wheat and other staple foods. The government has warned it will be unable to pay public salaries if the standoff continues.

On Monday, the Libyan navy said it fired warning shots at a tanker trying to load oil at the eastern port of Es-Sider, which was seized with two other terminals by the autonomy group in August. The three harbours accounted previously for 600,000 barrels a day.

But the group, led by tribal leader and 2011 civil war hero Ibrahim Jathran, shrugged off Tripoli's warning by inviting foreign companies to buy eastern oil.

OIL COMPANIES

"We welcome global oil companies ... The oil security guards will guarantee the safety of tankers," said Abd-Rabbo al-Barassi, prime minister of Jathran's self-declared government in the eastern Cyrenaica region.

Workers at the seized ports had returned to work, he said. A newly founded oil company called Libya Oil and Gas Corp would be dealing with potential buyers. A new army and coast guard, made up of Jathran's battle-hardened fighters, would secure the ports.

Barassi said his group had nothing to do with the tanker shot at by a Libyan navy vessel on Sunday on its way to Es-Sider. Tripoli has said the tanker was intending to load oil at the seized port, but Barassi said this was a "lie."

The confrontation has raised worries that Libya, also struggling with Islamist militias and armed tribesmen, might break apart as Cyrenaica and the southern Fezzan region demand political autonomy.

But Barassi said in a television broadcast that his group had no plans to secede.

He also invited Tripoli to send a delegation to help oversee oil sales. "We assure all Libyans that the sale of oil will be according to the law."

The group is campaigning for a federal state sharing power and oil wealth between Cyrenaica, Tripolitania in the west, and Fezzan, as was the case in the kingdom that preceded Gaddafi's rule. Oil sales were then shared between the regions.

STANDOFF

Libya's defence ministry had earlier warned potential buyers against any docking at the seized ports. "If a ship docks in one of the closed ports, and it does not leave the port again, then we will destroy it," said Defence Ministry spokesman Said Abdul Razig al-Shbahi.

Tribal leaders have sought to negotiate on behalf of the government with the group holding the ports. Those negotiations to have gone nowhere despite pressure from tribal leaders, some of whom look down on Jathran as a warlord leading the country into chaos.

The risks of an escalation were clear over the weekend when the Libyan navy said it opened fire on a vessel trying to reach Es-Sider before the tanker, Baku, turned back to Malta.

The owner of the tanker said on Tuesday the vessel had been in international waters and denied it was involved in trying to smuggle crude oil.

The owner, Palmali, said a Libyan naval vessel fired warning shots even after it provided written confirmation to the Libyan National Oil Company (NOC) that it was no longer sailing to Es-Sider.

TRIBESMEN PROTEST

While negotiations with Jathran have failed, they worked elsewhere: Output at the southern government-controlled El Sharara oilfield rose further on Tuesday to over two-thirds of full capacity and a pipeline shipping condensate - very light crude - to a western port reopened.

Talks had ended a protest by tribesmen at El Sharara with production there climbing to 277,000 bpd on Tuesday and expected to reach full capacity of 340,000 bpd by Wednesday. Libya's output was over 1 million bpd in July before the strikes started.

"I think if we keep up at this level we will reach capacity by tomorrow," NOC spokesman, Mohamed al-Harari, said.

Protesters, who had blockaded the El Sharara field for two months, had been calling for the establishment of a local council and the granting of national identity cards for tribesmen from the Tuareg minority.

The pipeline carrying condensates from Wafa oilfield to Mellitah port, jointly operated by Italy's ENI in the west, has also been reopened after protesters briefly blocked the line, with output now at around 30,000 bpd, the NOC said. (Additional reporting by Ayman al-Warfalli and Ulf Laessing; Writing by Patrick Markey and Ulf Laessing; Editing by Giles Elgood)

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